This article is from the Model Trains FAQ, by Christopher D Coleman with numerous contributions by others.
The first smoke mechanism Lionel used in 1945 simply allowed a smoke
pellet to rest in the headlight bulb with a special dimple in it. This
didn't work very well and was quickly replaced with a resistance coil.
Either heat source caused the pill to slowly melt and vaporize.
Unfortunately Lionel pellets are no longer made, as where they were
patented by the engineer who created them for Lionel. Production of
the pellets likely ended in 1969 and many bottles can still be
purchased, but they are becoming less common and are going for high
prices. K-line made their K-151 pellets in the 1980's which, though it
did not smell like the Lionel pellet, it worked resonably well. K-line
has not made pills since the early 1990's. To alleviate the patent
fees, Lionel converted to a petroleum based liquid smoke in the
1960's. Since smoke units designed for liquid have an absorbent
material built into it, the pellet and liquid should only be used in
their respective style units. Flyer and Marx used only liquid smoke
units. Smoke liquids currently available can be used interchangeably
in liquid smoke units. Additionally some new liquids are designed to
give off specific scents such as the smell of original Lionel smoke
Original Lionel smoke pellets have become collectable in their own
right, so if you have them, use them sparingly and fill in the gaps
with other brands. You might also use a few drops of liquid smoke in
your bottle of pellets occasionally to keep them from disintegrating.
This will also extend their life inside the smoke unit. Using a pipe
cleaner to brush the white residue inside your smokestack back into
your generator will extend the effectiveness of the pellets you use.
It has also been suggested that scented lamp or Seethe oil may be
used. Other home-remedy smoke includes asprin and candle wax. I have
not tried any of these.
Absorbent material can be added to old pellet smoke units in the form
of a small tuft of fiberglass insulation. Again, I have not tried this
and cannot attest to the reliability, efficiency or safety. Also once
material is added, it will no longer function properly with pellets.
Personally, I have a small stash of both Lionel and K-line pellets
which I enhance with some fluid. Fluid will work in an unmodified
pellet unit, but could fowl it. I only used fluid in a pellet unit in
addition to the pellet (not in place of it) or when the unit is at
Liquid smoke is available from:
"Roscoe Smoke Fluid"
Bart's Pneumatics Corp.
1952 Landis Valley Rd.
Lancaster, PA 17601
Available from Mikes Trains and Hobbies
Address in PARTS section
"Lehigh Valley Train Service"